Bloomberg (USA): the Russian project of the underwater gas pipeline to Europe is under threat of litigation

Next week, the group involved in the implementation of this project will try to get guarantees from the European Union that it will not be subject to the new rules of regulation of the EU gas market. These rules will affect the profitability of this gas pipeline. If guarantees are not provided, this group of companies may go to court.

The new rules come into effect on 23 may, and they prescribe a simple procedure for refusing to comply with the requirements in the case of already built gas pipelines, which may not apply to the not yet built Nord stream 2. The European Commission is unlikely to make concessions under pressure, as reported by three sources familiar with the situation, who asked not to be named.

“We are put in different competitive conditions compared to other gas pipelines originating in third countries, — said Sebastian Sass, representative of the Nord stream 2 projects in the European Union. — We are considering other legal means, such as appeals – everything will depend on the content of the European Commission’s response.”

The second branch of the Nord Stream gas pipeline has divided the governments of the EU countries: several EU members led by Poland are concerned about the growing dependence of the block on Russian gas and the intervention of Russian President Vladimir Putin in the Affairs of Ukraine. This pipeline will allow delivering gas to European buyers on the bottom of the Baltic Sea, bypassing the territory of Ukraine. Earlier this year, the European Union approved amendments to the Gas Directive, which relate to the import of natural gas from third countries, in particular, the requirement to divide the production and transportation of gas. The new regulations apply to all new and existing pipelines, and only completed pipelines can receive some relief. Those gas pipelines that have not yet been put into operation have the right to ask for an exception to the new rules, which will require the approval of the European Commission.

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According to representatives of Nord stream 2, the wording of this EU law and the possibility of different interpretations of its requirements may result in infringement of the rights of individual investors. In April, the company sent a letter to the head of the European Commission Jean-Claude Juncker with a request to officially confirm that under the new legislation the conditions will be applied to the project no worse than to other similar gas pipelines, investments in which were made long ago. The EU regulator should give an answer before may 13.

“I understand that there is now a political debate about the feasibility of building Nord stream 2, and in this matter, the presence of different opinions is quite natural, but there are boundaries established by legal principles, such as the principle of non-discrimination, — said Sass. — The purpose of this non-inclusion request is to protect the legitimate expectations of investors. It has nothing to do with whether the project is completed or not.”

The section of the Nord stream-2 gas pipeline, located in the territorial waters of Germany, has already been completed, and the construction of other sections of the gas pipeline is ongoing. It is planned that it will be put into operation by the end of 2019, despite obstacles from Denmark, which asked supporters of this project to consider another route.

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The group of companies implementing this project claims that a new pipeline is needed to guarantee continuous gas supplies in the next few decades — against the backdrop of a decrease in the EU’s domestic reserves and a growing demand for imports. Opponents of the project argue that it violates the integrity of the unit and hinders the implementation of the energy Union strategy aimed at the integration of gas and energy markets in the region, diversification of energy supplies and improving security.

The US, which wants to supply its gas to the EU market, joined the chorus of critics of Nord stream-2.

“This project will allow Russian gas to reach the heart of Western Europe, giving Russia the opportunity to increase its influence on European foreign policy,” — said U.S. energy Minister Rick Perry (Rick Perry) last week, speaking at an energy conference in Brussels.

Sniper, Engine, Royal Dutch Shell, OMV and Wintershall are the European partners of the Russian gas monopoly Gazprom, which invested in the project to increase the capacity of Nord stream by 55 billion cubic meters per year. A third of the gas consumed in Europe is purchased from Russia, and Moscow has no plans to give its market share to competitors from Norway and the United States.